The 10 Simple Rules of Smart Investors

At the end of the day, investing is all about growing your assets that are mainly in the form of cash. The goal in investing is to preserve your capital (the original funds invested) and to receive a return on your investment that is the greatest possible while minimising the risk of failure in that endeavour. Any investment must deliver a return greater than the inflation rate otherwise the investment is diminishing in value.

Liquid Investments

A good example of a liquid investment is putting money in a Fixed Term Deposit account. A term deposit is a type of savings account that pays a higher interest rate over a longer period of time,because the funds are committed to the financial institution for a set period and are generally not available for use by the owner during that agreed fixed term.

The big advantage of term deposit accounts in Authorised Deposit Taking Institutions (ADI's) is that they are very safe and offer a rate of interest for a specific period of time. Since the interest rate will not change, you will know the actual return you will receive on your funds at the end of the fixed term and you will not have to worry about any decrease in interest rates during that fixed term.

A fixed term deposit is a good place to begin investing because it easily allows you to accumulate money. A strategy employed by some is to use a fixed term deposit account is to save a set amount of money, and then start reinvesting the interest earned on that money in investments which offer higher returns such as shares, property or your superannuation account.

Again we strongly recommend that you engage with a financial planner to develop the best investment strategy for you today and into your retirement years.

Rules of Investing

Following these simple rules of investing can greatly assist you in growing your wealth and to progress towards the achievement of your financial goals.

Pay yourself first. Put money in a savings account with an automatic deposit system. Holiday Coast has automatic savings options available through its online banking features.

Set clear goals so you will have a reason to save. Get yourself motivated by imagining and planning for your goal or goals.

Take advantage of the long standing and proven principle of compound interest with your investments. Holiday Coast’s Compound Interest Calculator will show you how it works to grow your savings.

Ensure you appreciate the link between risk and return and seek help from a financial planner before you invest, unless you are an experienced investor

Diversify your investments so you will spread the risk of loss and protect you against the possibility of losing all your funds through a failed investment strategy.

With the help of your financial planner and accountant manage your finances to minimise your tax payable. Bridges Financial Services can assist you in implementing such strategies that will align to your risk framework.

Avoid speculation, trying to achieve the best market timing, trading and generally any strategy that "promises" to beat the market.

Understand the difference between good debt and bad debt. Good debt helps you make more money in the future by paying for something that grows in value, such as property or alternatively improves your personal health and well-being. Bad debt pays for something that loses value over time and as such diminishes your wealth.

Have a plan to achieve your goals. Holiday Coast has tools that can help you achieve this, including a Budget Calculator and Savings Plan Calculator. We also encourage you to engage a financial planner and that we recommend the financial planners with Bridges Financial Services.

Always remember the first rule of investing, as set forth by the great American investors Warren Buffett and Benjamin Graham.